Commentary on Political Economy

Tuesday, 1 November 2011

Socialism, Keynesianism and the Law of Value

The
labor theory of value confirms and consolidates the centrality of “labor” to
social life, especially under the capitalist mode of production, in a number of
ways that are essential to understanding the origin, development and (what we
are now witnessing) the final collapse of Social Democracy in Europe first and
then around the world. The first is that “labor” provides the only source of
social wealth outside of “natural use values” that cannot be produced such as
land, air and water. The second is that “labor”, through the “division of labor”,
provides “the social synthesis” – the inter
esse, the “com-unitas”, the social unity and cohesion that is needed for
economic industrial production and its co-ordination to take place. A third way
is that “labor” offers the most equitable and fair and just as well as efficient
principle of “distribution” of the total “value” or “wealth” produced in a
society.

And this
is the point where “socialist” parties depart
from Classical Political Economy with its strict adherence to the belief that “the
market mechanism”, the Law of Supply and Demand, is the best way to distribute
the “gross domestic product” (or GDP). It is the “socialist” belief that the
market mechanism is really the essence of capitalism in that it distributes the
social wealth (value) produced by “labor” according to the market mechanism
that works through “prices” that allow capitalists to extract a “surplus value”
from workers and their “labor power” – a “surplus value” (Marx) or a “monopolistic
mark-up” (Kalecki to Minsky) that in turn is the basis for, first, the “inequality
and injustice” of distribution and, second, for the “anarchy” of the capitalist
market.

It is
this “anarchy” that “Socialism” attacks, as does Keynesianism. Behind the
Keynesian notions of “uncertainty”, of “rational spirits”, of aggregate and
effective demand, of “debt-deflation” – behind above all the Rooseveltian
notion “nothing to fear but fear itself” – lies precisely this apprehension and
analysis of “market failure” due NOT to the antagonism of the wage relation,
but simply due to “the lack of co-ordination” of the capitalist market system,
to the “excesses” of “casino capitalism” (Keynes’s “beauty contest”), due to
the “greed” of individual capitalists (Keynes’s “auri sacra fames”)!

In
other words, Socialists and Keynesians agree as to the “rationality” of the
capitalist system of production founded on the wage relation – on the “exchange”
of living labor with dead labor in the form of the money-wage – and merely seek
“to bridge” the inevitable “gap”, the “hiatus” constituted by “money” (which Keynes
defined as “a bridge between the present and the future”), by bringing the two
entities – money and labor – into closer “correspondence” so that money and
finance correspond to the “correct” amount
of labor that is contained in “industrial
output” and so that market prices correspond to the “correct values” of the goods produced according
to “consumer demand.

The “anarchy
of capitalism” consists for Socialists and Keynesians in this: - that the “profit-seeking”
decisions of capitalists through their “monopolistic mark-ups” constitute a distortion of the true labor value or content of production, causing thereby a “distortion”
in the “pricing” of goods such that there results an “involuntary unemployment”
of human and physical productive resources (“output”). This “distortion” is
reflected in Okun’s Law regarding the “gap” between “potential” industrial
output and employment.

This
parenthesis on the Labor Theory of Value was needed as a preface to our
discussion of the Neoclassical Revolution, to which we will turn soon.